Trascrizione della presentazione video MARIO GRECO, GROUP CEO

Transcription

1 13/03/2014 RISULTATI CONSOLIDATI GRUPPO GENERALI AL 31 DICEMBRE 2013 Trascrizione della presentazione video MARIO GRECO, GROUP CEO Overview Welcome Media Relations T press@generali.com Investor Relations T ir@generali.com Hello and good morning. Welcome to Generali s 2013 year end results was a pivotal year in the history of Generali. In January, we launched our turnaround plan, and then in November we accelerated the pace at which we were instilling greater simplicity, discipline and focus into our busin ess. First year of three-year turnaround plan Let s now review the impact of these changes for the first year of this three-year turnaround. Overall, the results have been satisfactory and we have made solid advances towards our key milestones. We have completed 2.4 billion of assets sales. In this way, we were able to make clean disposals for cash in markets which remain challenging. We are now 60% towards our three-year target of 4 billion. In addition to enabling Generali to focus on our core business, these disposals also improve our capital position. Our Solvency I ratio was above 150% at the end of February and shareholder s equity has significantly improved to 20 billion. Taken together with the actions we have taken to ensure greater discipline in our balance sheet, the improvements we have made to our capital position means that Generali is already a more solid business than when I took over as CEO in August Dividend Consequently, we are able to begin to increase our distribution to shareholders. Today, we are announcing the beginning of normalising our dividend policy, and we will propose a final dividend of 0.45 per share, more than double the 2012 dividend. This increase is also an important signal to our investors of our growing confidence in the underlying potential of our business to generate distributable profits. So, let me now share some examples of the reason for our optimism. Key Strategies Acquiring minority interests Over the past year, we have invested just under 3 billion to acquire the minority interest in our businesses in Central and Eastern Europe, Germany and Asia and in restructuring the operations of some of our other businesses. Our goal is that Generali will be driven forward by a balance of strong motors of profitability in mature markets such as Germany together with new engines of growth in high potential markets such as Central and Eastern Europe and Asia. These investments allow us to fine tune these engines of profitability and growth, and to reap the benefits of a simpler and more efficient organisational model. Our operations in Italy, Germany, France and Central and Eastern Europe contribute three quarters of our total operating profit but we only fully controlled two of them in the past. We will have full ownership by the end of this year, facilitating the implementation of our extensive programmes of technical excellence and customer focus and allowing us to capture full value from them. Cost efficiency Turning to our costs, we launched a substantial number of operational efficiency programmes across the group in With the arrival of our new COO and a complete

2 reorganisation of this function, we were able in November to increase the ambition of our targets and cost savings with 750 million to be delivered by year end 2015 as against the previously announced 600 million, and 1 billion to be delivered by We are being rigorous in discipline in the implementation of these programmes and we expect to achieve a further 300 million over the course of this year to add to the 200 million achieved already last year. These savings will not only help us achieve greater efficiency and keep cost inflation to a minimum, but over the longer term, they ensure greater focus on customer service and technical excellence. Long Term Targets In this light, we look at our 2013 results through the lens of our long term targets. The first point to draw your attention to is our cash flow which has increased strongly over the year. We have already exceeded our 2015 target of 2 billion, reflecting the improving profitability of our property and casualty business and of our financial services business as well as the decrease in new business strain. This result shows the power of running our business with a strong discipline to generate cash. Our other KPIs were positive over the period with our operating return on equity up by 80 basis points to 12.1%, the leverage ratio down by 80 basis points and interest cover goes up 50. These are moving in the right direction and support our belief that, despite the challenging environment and persistent low interest rates, what we have set out to do at Generali remains achievable and on track. Let s take a moment to look at some of the steps we have taken to our business to achieve these results. We are being methodical in clearly setting out what needs to be done, left no stone unturned in the delivery of our revolution, so let s start with two of the more ambitious markets in terms of the changes we are making. Delivery Strategy Central and Eastern Europe The first is our business in Central and Eastern Europe. When we took full management control in April 2013, the new Generali team took quick and decisive actions to protect and where possible, improve profitability. You can see the results in our property and casualty business on this slide which is a good performance despite the significantly higher in Nat Cats. This is an important region for us and is a business that has the potential to be a major insurance force in the region with a 6% market share and consistently good performance. I see many opportunities for us to leverage our expertise and capabilities across our businesses in the region. We are well-positioned with a strong brand in a market where there is everything to play for. Italy In Italy, we have reached our objective and created Generali Italia through the merger of Generali, INA Assitalia and Toro. These were highly complicated transactions to carry out well but, the results have been satisfactory with an increase of 16% in the profitability of our Italian insurance business in Germany In Germany, we are the number two player with leadership positions in both unit linked and protection. Our strength in property and casualty is also helping us to win market share whilst maintaining a good combined ratio. Germany continues to be a solid engine of profitability for our group. Asia Turning to different sort of engine, our position in the higher growth markets of Asia. In November, we bought out the minority stake of Generali Asia which will allowed us to focus

3 on transforming its relatively limited contribution to the group s revenue to something more substantial. Let me be clear that despite the 20% compound annual growth rate, we run this business for profits, not only premium growth. Finally, in China we have, by any measure, a solid foothold being the biggest non-chinese company with 656 million of premiums and over 25 million of profits in We have long ties with the country and we are confident that we can translate that to profitable growth. New team and road map When I last presented to you at the end of November 2013, it was to introduce several of the recent joiners to our new management team and filling some of the outstanding elements of our turnaround plan which we had launched in January of that year. I left you with a road map for our journey to technical excellence and greater customer focus that will be the foundation upon which we rebuild Generali. Our aim is for Generali to once again be one of the great international insurance groups, a group that provides its shareholders with steadily increasingly profitability and improved returns. I call it a revolution because I understood that the changes needed were both profound and urgent. Our rallying cry is discipline, simplicity and focus. Priorities On the right of this slide you can see just some of the many priorities we have for the year ahead as we continue to deliver on our plans, highlighting just a couple. We complete this year the acquisition of the minority stake in our Central and Eastern Europe joint-venture, giving us full participation of this high potential market and the ability to roll out our full programme of operational optimization and technical excellence. We further capitalised on the strong position we have in Direct. We are a market leader with over 4 billion of premiums coming from direct channels. We will use our know-how and experience in this area to extend our leadership position and roll out innovative new products and services for our customers. What the future holds 2014 would be a year of further transformation and delivery as we continue to harness the power of simplicity, discipline and focus. Finally, here is our reminder of the clear vision for what our group will look like by the end of 2015 against which you can judge our progress. More focus on our core insurance business; Superior customer acquisition and retention; A stronger capital position and more discipline with our balance sheet; and Consistent technical excellence and the tight controlling costs. As I said at the beginning, 2013 has been a pivotal year. While it is an encouraging start, we do not underestimate the amount of work that remains to be done. We are very much aware that Generali is still a work in progress and that this is a complex project that requires another two years of hard work. We remain focused, determined and passionate about our vision for the business. It is a long and challenging task, but if anything, the results from this first year give us confidence that by giving the same level of commitment and focus, our efforts can and will produce the results we are striving for. Thank you for listening.

4 ALBERTO MINALI, GROUP CFO Full year results 2013 Introduction Good morning, this is Albert Minali, CFO of Generali. I am pleased to report to you this morning our full year 2013 results which as Mario has said demonstrates that we are well on track to meet our targets. Let me start with a brief overview. However, before that, please note that prior years figures have been restated throughout the whole presentation to reflect the new geographical perimeter of the group. Overview The total operating result of the year is up 5.3% to 4.2 billion. I would say that this is a satisfactory result achieved in a year of transition and characterised by weak market conditions: low interest rates, weak GDP especially in Italy, a soft motor-market in many countries. The net result has reached 1,915 million, significantly recovering from last year. Shareholder s equity is up 4% to almost 20 billion. The Solvency I ratio is down 4% to 141% from 1 st January and this is net of 2013 dividend due in May for 4% points. It also excludes 3% points from a subordinated loan which we have determined to be ineligible, which I will explain in a moment. At the end of February, the Solvency I ratio is back to 150% level, mainly thanks to market movements. When we replace this subordinated debt, we will thus be above 150%, all other things being equal. Exceptional items in Q4 We had a number of positive and negative exceptional items affecting the Fourth Quarter. Overall, the impact on the net profit in Solvency I were small but there are some significant individual items in offsetting directions. So let me take the time to guide you through them in order of materiality to the net results. Disposal of US Re and Mexico As you know, both of these transactions closed in October and I confirm that we have received the cash and the benefit to the Solvency I ratio is 5 percentage points as previously announced. The overall net capital gain booked was 0.5 billion. Banca d Italia As you have probably read in the press, shareholders of Banca d Italia, of which we are one, would be forced to reduce their shareholdings to a maximum of 3%. We currently have 6.33%. In addition, the Italian parliament has given approval to a decree to revalue the share capital of Bank of Italia to 7.5 billion from the previous valuation, which had remained unchanged since 1930s. We were required by law to revalue our stake accordingly. For our share, this corresponds to 255 million year positive impact to net result and the positive impact of one solvency point. BSI VOBA The BSI adjustment refers mainly to the VOBA deriving from the acquisition of the Banca del Gottardo. In particular, local analysis assessed a potential loss of the client portfolio and the VOBA amortization pattern previously applied was considered as inadequate. We therefore decided to accelerate it. This led to a full amortization of the residual VOBA. This explains circa 150 million of the net impact. There are some other minor items taking the total to

5 217m. This approach, I must add, is coherent with the one followed by BSI in the statutory financial statement. Revaluation of Telco to year end market values We have decided to revalue our investment in Telco fully down to year end implied market value, i.e. on the basis of a Telecom Italia share price of 72 cents per share with an impact on our net income of 189 million. Our strategy here has not changed at all. We will exit the position at the appropriate time but hopefully, these adjustments puts behind us any further negative financial risks. Indeed, if I look at the share price of Telecom Italia today, it s above the value to which we have implicitly impaired it. French reserving Here, as you all probably know, the guidance for determining bodily injury claims in the French market as determined by the courts is changing. Both in actuarial terms and also in terms of the standardisation of scales used to determine the degree of disability and loss of income. We have reserved for these changes in Q4 with an non-operating impact of 193 million before tax, equating to 127 million after tax. Exceptional tax in Italy As many of you are aware, the Italian government passed a law at the end of last year providing for an additional tax on banks and insurance companies. Thus, in Italy and for this year only, we were subjected to a 36% rate of tax. This cost us an additional 90 million in respect of the 2013 net result. For the group as a whole, I would say this offsets an exceptionally low tax charge in Q3 taking our overall tax ratio for the year to 32%. Reassessment of bond eligibility Now, let me move to one item that does not have an impact on our earnings but does affect solvency. During the Q4 of 2013, Generali has received from Mediobanca, with the reference to the loan granted to the company of 500 million, a request for the application of the contractual additional cost clause that they could apply in case of increased financial burden deriving from changing rules. As a consequence of this, Generali carried out a thorough analysis of the contractual documentation and found that at the time of financial agreement 2008, an option contract between Generali and Mediobanca had not been communicated by the Company to the Supervisory Authority. The option could allow Generali, with the approval of the Supervisory Authority, to buy in advance the aforementioned subordinated liability following the signing of the loan agreement. The option to repurchase this subordinate liability was not communicated to the Board of Directors nor was it subsequently disclosed, nor was it made known to the new management of the Company. In light of this, the group has promptly sent all documentation relating to the matter to the Supervisory Authority, has informed the Risk and Control Committee, the Board of Directors of Generali and the statutory auditors, simultaneously launching an extensive internal audit. Upon request from IVASS, Generali has also performed a review of all subordinated debt as part of a comprehensive capital review. There was no evidence of any further failure to provide information to the Supervisory Authority and to the competent boards of the company. As a result of its examination, IVASS stated on 4 th February the non-eligibility of this subordinated financing for the calculation of solvency margin with effect on the solvency ratio as from 31 st December The non-eligibility of this hybrid subordinated financing has a negative impact estimated about 3% points. As Generali intends to repay this subordinated loan using financial resources already available, and will replace it with an appropriate capital financing instrument, this event will have no impact on the group s ability to reach the target of 160% of Solvency I by 2015.

6 Other net exceptional assets, gains and losses. Then we have a number of other plusses and minuses for a total of 138 million negative impact on net income. There are a number of smaller items here, including some timing differences, some hedging losses and other net gains and losses on investment assets: Gains on some equity positions, and some losses on real estate inventories. Operating result by segment The total operating result is up 5.3% to 4.2 billion. Life is up 4.3% to 2,645m with positive contribution of both investment result and expenses. There is a continuing good performance of P&C segment +3.5% to 1,616 million, despite a higher level of NatCat, while Financial Services is up 18.4% to 483 million. The operating holding expenses increased from 313 million to 354 million due to the strengthening of corporate central function and launch of new group projects. The result after tax and minorities, as I said at the beginning of my presentation, reached 1.9 billion including, as said before, a number of positive and negative one-offs. From operating result to net result Let s see, now, the journey from operating result to the bottom line. Overall there is a negligible contribution of 5 million from non-operating investment income versus a loss of 1.4 billion at year end The largest two items inside were the gain on Banca d Italia shares, offset by the impairment on Telco, both of which I referred to before. The nonoperating holding expenses have reached 806 million, up from 673 million last year with an increase of 133 million. This item mainly comprises interest costs for 751 million, increasing 83 million from last year. You remember here the issue in July 2012 at higher rates and the 1.25 billion subordinated bond issued in December And this line also includes extraordinary corporate centre restructuring expenses. The net other non-operating expenses are unusually high this year at 1 billion due to some of the one-offs I mentioned before. Specific items I would like to point out are the following: 189 million adjustment before tax to the BSI related VOBA. The French Bodily Injury Reserves of 193 million before tax. Some exceptional write-offs to inventories of property developments for 130 million. The VOBA amortization accounts for 175 million, which I would say is a normal run rate. We have also around 94 million of restructuring costs. The results from discontinued operation have reached 560 million. A 0.5 billion gain on disposal of Generali US Re and Mexico operation was recorded in Q4. The minorities are down at 227 million due to the acquisition of 25% of GPH. Group free cash flow Let s now turn to see how these earnings have converted into cash. On the top half of the slide you see our net expected free surplus strongly increased compared to 2012, thanks to the positive contributions spread across the three segments. In particular, increase of Life free surplus due to higher profit released from the business in force and lower new business strain. The increase of Property and Casualty free surplus is due to lower minority rates (the 25% GPH plus the 3% of Generali Deutschland in Germany), and lower required capital, mainly in the Italian perimeter. The increase of financial segment contribution is mainly due to operating result increase. With 2.1 billion in total, I am pleased to say that our 2015 target of more than 2 billion has already been achieved two years early. On the bottom half of the same slide, with the remittance ratio about 70%, you see our net free cash flow before dividend, which is 1.2 billion. We are well on track to achieve the 2015 target remittance ratio of 75%.

7 Shareholders equity Let s now turn to the balance sheet. We have an overall 4% increase in shareholders equity to almost 20 billion. The contribution from the financial year 2013 net result, 1.9 billion, has been partially counterbalanced by 311 million from dividend payment in May 2013, 870 million of other items which is mainly 569 million from the buyout to GPH and to a smaller degree, the buyout of GDH. And, 298 million from foreign exchange. Solvency I Let s move now to the Solvency I position which decreased four percentage points from 145%, the figure stated at yearend 2012, to 141% at The positive contribution of consolidated results for 9 percentage points, more than compensated by a number of negative items, the most important of which are: The increase required margin due to organic Life reserve growth, roughly 3 percentage points; M&A transactions of the year, one percentage point (Disposal of US Re and Mexico and acquisition of 25% of GPH and 3% of GDH.); Increased 2013 dividend for shareholders which accounts for 4 percentage points; and The reduction of the eligible subordinated debt for 4 percentage points. I remind you that, as previously explained, three percentage points represents a temporary shortfall that will be replaced well before the end of the plan. At the end of February, our Solvency I ratio has already come back to a 150% level, mainly thanks to market movement effects and earnings, and before we replace the subordinated debt, which I mentioned. On our S1 target I want to be clear. I remain confident to reach our 160% target by the end of 2015, thanks to our organic earnings generation, net of an increase in dividend payment, the completion of our disposal programme, and the issue of new fully eligible capital instrument in substitution for that we recently lost. I show you these elements on the slide which, apart from the replacement subordinated debt, looks very much like the picture I showed you in November. I would also emphasise that in this chart we have not taken into account the positive market to market movements we have enjoyed in the first two months of the year, which provide a further buffer. Leverage In terms of leverage, we have a slight improvement of the leverage of ratio from 40.4% to 39.6% on a year on year basis, driven by the reduction of the stock of financial debt. You remember that during the first half of 2013 we reimbursed, using our internal resources, around 500 million financial debt. And, we also have increased shareholders equity. The interest cover ratio increased from 3.6 times to 4.2 times and also we have improved group profitability, more than compensating the increased interest expenses on financial debt related to the subordinated bonds issued in Both ratios are expected to improve further in 2014 due to the announced debt reduction target. On 7 th January of this year we issued a new senior bond, which will be used to refinance part of our maturities in 2014, at very good pricing condition with a fantastic market participation and strong secondary performance. The refinancing at better cost of borrowing with respect to the maturing bonds will further contribute to the improvement of the interest cover ratio. Economic view of the balance sheet Now, moving to more economic views of the balance sheet. Let s have a look at the embedded value overall. The group embedded value increased from 23.7 billion at the end of 2012 to 28.8 billion at the end of this year, driven by solid normalised earnings of roughly 3.1 billion, a positive investment variance of 3.3 billion, driven by billion impact from the spread to the swap-curve narrowing, and 1.6 billion impact from increasing risk free rates, only partially counterbalanced by changing the geographical perimeter (roughly 0.9 billion) and the 2012 dividend of 0.3 million.

8 Mirroring this improvement, our economic solvency ratio improved from 159% to 184%. The positive economic factors which also drove the embedded value led an additional 30 percentage points of available capital. We had the changes in perimeter which reduced the ratio by 8 percentage points. And we had slightly lower capital requirements, which increased the ratio by 6 percentage points, primarily due to the improved financial market conditions. Liquidity position I want to give you also an update on the liquidity position. Liquidity reached 13.2 billion down from 22.4 billion at year end of This is a good improvement, although liquidity was slightly higher than we anticipated at year end, driven by the continuing reduction of Italian sovereign bonds, the sale of some equity stakes and over 2 billion of Life net inflows. Market conditions did not allow a complete redeployment of all the cash but we continue to work on it. In terms of the BTP exposure, this continued to fall through We expect this also to continue in 2014 as we seek to further diversify our portfolio. Life insurance segment Overall Life premiums have been stable at 45 billion while net inflows have posted a strong increase to 8.7 billion, up from 5.6 billion year on year. Life operating result is up 4.3% on a year on year basis, with a stable Life operating ratio on investment at 77 basis points. The new business value is up 14.2% at 937 million, driven by margin expansion of +2.7pts%. If we look at the operating result by driver, we see that the overall Life operating result, is 2,645 million (+4.3%). The technical margin is slightly down -0.7% at 5.7 billion, within a normal fluctuation range, mainly driven by lower surrender profits in Italy and Germany, the latter reflecting changes to the calculation of surrender values following the Federal Court of Justice decision in The investment result component is up 3.5% to 1,783 million. The main contributor here was Italy following a significant reduction in operating impairments from last year. Expenses in the Life business reduced by 93 million to 4,882 million due to lower administration costs in Italy and France and also lower strain of acquisition costs in Germany, Switzerland and CEE. We had a strong recovery in the net inflows which continued, reaching 8.7 billion, up from 3.1 billion last year. Worthy of note: Italy continues positive recovery trend, thanks in equal measure to higher gross inflows and lower maturities. Here we had important corporate business maturity in In France, we have negative net inflows but strongly better than in 2012, thanks to the surrender rates back to physiological levels. Germany confirms the strong development with 4.4 billion of net inflows, and also the robust performance of EMEA, negatively affected in 2012 by 1.5 billion single premium cancellation. The strong net inflows and a good investment performance back to policyholders led also to a 4.8% increase of net technical reserves. Life own investments have reached 282 billion, up 3.4%. The total Life current return stands at 3.8%, down from 4.1% of last year. Fixed income yields are at 3.9% down from 4.2% in the previous year, mainly, I would say, a function of the current low yield environment, while equity and real estate current returns have slightly decreased. Liquidity is down from 4.7% at the beginning of the year to 3.8%, around 10.8 billion, as previously seen slightly up from the end of September. This will add to support the current returns going forward. During the year we invested pre-existing cash net inflows, bond redemption and coupons at an average yield of 3.6%. The duration gap has been reduced to 1.5 years from the 2.1 at year end 2012 due to the reinvestment of cash into bonds and longer maturity of new bonds. The APE is down 1% on a like for like basis to 4.5 billion. We have a robust development in Italy, up 12.7% on a like for like basis, driven both by single and recurring premium. France is down 20.3%, 192 million, with artificially high APEs in 2012 due, as you remember, to surrender recovery operation. Without this, APE would be only marginally down by -1.3%. We have a flat APE in Germany, +0.8%, despite exceptional production in the fourth quarter 2012 in both savings single premium and protection regular premium (Year end sales before the unisex tariff introduction).

9 CEE is down 23.7% on a like for like basis due to the negative development of pension funds in the Czech Republic and Poland after the recent regulatory changes. The new business value is up 14.2% on a like for like basis to 937 million with a new business margin at 21%, up 2.7%pts notwithstanding a negative impact from the disposals of 1.1 percentage point and lower reference rate three out of four quarters versus the previous year. This increase in margin is explained by the improved business mix, increased weight of unit linked (+2.1%pts) compensated by an equal reduction in weight of saving business. Protection component is stable at 15.4%. Saving business margin recovered, thanks to the continuing reduction of the new business guarantees, from 1.38% at year end 2012 to 1.23% at financial year We had outstanding new business margin in CEE, Germany and EMEA, driven by a higher proportion of unit linked and protection businesses. Property and casualty segment Now let s start to look at P&C. The gross written premium is slightly down, -0.6% to 20.9 billion. Motor business at 8.3 billion total gross written premium is up 0.3%, driven by strong growth in Germany, +10%, and LatAm, +48% (but partially inflation driven), offsetting weaker developments in Italy and France. Primary non-motor is down 1.2%, the positive performance of personal line totalling 5.1 billion +1%, more than offset by trends in commercial business, 4.2 billion -3.5% and Accident and Health 2.6 billion which is down -1.9%. We had also an improved combined ratio at 95.6%, down 0.2%pts on a year on year basis, despite heavier NatCat burden, 2.3% compared to the 1.4% of the previous year. The P&C operating result is up 3.5% on a year on year basis to 1.6 billion. Looking at the components of these operating profit improvements, we see a stable technical margin at 0.8 billion despite increased NatCat burden. Investment results are broadly stable at +0.8% at 1 billion and other items improved roughly 50 million due to the recovery charges concerning the pension provisions and lower net other charges. I want to also add a specific comment on the fourth quarter. If we look at the fourth quarter in isolation, we have a relatively weak P&C operating result. This is due to a lower contribution from prior year reserve development at only 0.9% combined ratio points for the quarter. However, quarterly numbers from here can be volatile. We had an unusually high level of releases in the second quarter and so overall the prior year results for the full year is exactly within the normal range between 3% and 4%pts. A look at the main countries Overall premium is down 0.6% mainly affected by the negative trends of Italy and France, only partially counterbalanced by the strong development of Germany and Latin America. Let s have a look at our three main countries. Italy Italy is down 7.6% to 6.3 billion. The primary motor business 2.6 billion is down 11% due to the one-off impact linked to the new regulation forbidding automatic renewals (-3%), lower new car registration and higher competition (-2.6% in number of policies, we lost roughly 133,000 contracts) and also the declining average portfolio premium -5.9%. In primary nonmotor, personal lines are up 1% while accident and health and commercial are down respectively by 6.6% and 8.3%, both affected by the economic situation. France France is down 4.9% to 2.7 billion but in a recovery trend from September 2013 when it was down 5.6%. Primary motor 990 million is down 8.1% driven by declining number of contracts which reflects the impacts of tariff increases in a competitive environment and also pruning of fleet contracts. In the non-motor personal commercial lines we are down 0.9% and 5.1% respectively.

10 Germany We do have a continuing strong development in Germany, up 4.8% to 3.4 billion. The primary motor business in Germany, roughly 1.3 billion total gross premium, is up very strongly by 10%, driven both by an increasing average premium +4.4% and by the acquisition of new contracts, roughly 76,000 new contracts. In non-motor personal commercial lines are up 2.4% and 2.9% respectively while accident and health is flat. If we look at the combined ratio, it s equal to 95.6% down 0.2% on a year on year basis. The loss ratio is down 0.2% to 68.5%. We have a healthy 1.2 percentage point improvement in current year loss ratio excluding NatCat (69.5%) driven mainly by nonmotor lines. The NatCat burden is at 2.3 percentage point, up by 0.9% from last year. Prior year s development at 3.4% is at a similar to last year, and within the normal range as I discussed previously. The expense ratio is flat at 27.1% but with the administration costs down 0.2% and acquisition costs up for the same amount. Combined ratio by country Let s have a look at the combined ratio in our main countries. Italy is still excellent combined ratio at 92.4% down 3.3% entirely due to loss ratio improvements. We have lower NatCat for 1.6% (you remember last year, the terrible Emilia earthquake) and the balance is explained by improved underlying loss ratio. The motor combined ratio is still modestly improving, -0.9%pts, thanks to low claims frequency (6.6% versus 6.9% over the last year) and lower average claim cost, -1.2%. France combined ratio increased to 105.5% +4.1% due to increase NatCat burden and also with an improvement in current year loss ratio more than offset by worse prior year development. Germany and CEE are heavily impacted by NatCat, both around 4%, but with both enjoying an improvement in underlying loss ratio, while the combined ratio in EMEA is stable at 95.8%. Reinsurance renewal Let me spend now a moment on reinsurance, as the majority of our protection renews in January. The market conditions were favourable in this renewal. We had ample availability of capacity in the market and we had significant rate of reduction, in the ballpark between 15% - 20% which were negotiated across all lines, despite some protection being loss affected in In most classes, we were able to improve treaty terms and conditions, and the overall treaty spend for the group continues to fall as indicated in November. P&C Investments The overall investments for the P&C business stands at 37.7 billion, up 2% from financial year The total P&C current return is slightly down at 3.7%, down from 3.9% on year on year basis. Fixed income current returns are at 3.5% from the 3.7% due to the de-risking strategy and the low yield environment in which we operate. Real estate returns stands at 5.9% from the 6.4% of the previous year. The increased rate of cash during the fourth quarter 2013 to 10% is due to maturing fixed income investments, equity disposals and sovereign bonds disposal. It s a temporary situation and we will continue redeploying excess cash at the appropriate market conditions. Financial segment The operating result of the financial segment is up 18.4% to 483 million. We have an increase in net fees and commission +6.8% in BSI and Banca Generali and also some gains on unquoted equities. We also have increased intermediation margin which has improved the cost ratio by 2.7 percentage points. And, we have also increased the third party asset under management to 104 billion, +8.3%.

11 Conclusion So, let me conclude my presentation. We have made good progress in a transitional year for the group. As you have seen, profits are improving in all of our segments. Solvency I is on track for our 2013 target of 160%. Leverage has started to fall and will continue to fall in As Mario has already explained, evidence that we are already on the right path in terms of earnings generation and capital building gives us the confidence to more than double the dividend. Thank you for your attention.